Publication Date: Autumn 1998

A Y2K PLAN OF ACTION FOR CO-OPS AND CONDOS

Open any newspaper or magazine today and you'll find an article describing the so-called "Millennium Bug" or "Year 2000" or "Y2K" problem. This phenomenon is the product of a computer design and software programming flaw, in which computers that read the date on only two digits-understanding 1999 as "99"-would go hayw

SOME GUIDELINES FOR YOUR RESIDENTS While you are urging residents to check on their financial situation for Y2K, you might also offer the following additional hints, adapted from the American Association of Retired Persons (AARP) in its October 1998 Bulletin: Services Ask your bank, utilities and other service providers what they are doing to be Y2K ready. Medication If you take prescription drugs, especially medicine for a chronic condition, lay in an extra week or two supply of pills shortly before January 2000. If you use an electronic medical device, get full assurance from the provider that it does not need 'debugging'. Record-Keeping (for yourself and your cooperative or condominium) Keep paper records of bank deposits, credit card and mortgage payments, and other financial transactions for several months leading up to January 1, 2000. Have enough cash on hand to get through the long holiday weekend. Energy Prepare for the possibility of power outage with a supply of canned food and bottled water. Fill your fuel tank just prior to year end. Y2K Scams Although no Y2K scams have yet been reported, consumer experts warn that con artists may try to take advantage of people’s fears. Consumers are warned to be wary of all unsolicited offers of Y2K assistance. If you have concerns about a service or a product, take those concerns directly to the provider.

ire when the date turns to 2000. While the rest of us will be headed into the 21st Century, many computers will instead be under the impression that it's the year 1900. This could cause some computer systems to malfunction or to fail completely. Or the disruption could be turn out to be far less than has been dreaded-there is no way to know for sure. However, careful planning can considerably mitigate disruption and can ensure that your cooperative or condominium and its resident owners make a smooth and uneventful transition to the next century.

THE SCOPE OF THE PROBLEM
The Year 2000 dilemma could have a heavy impact on the operation and management of your cooperative or condominium. Before this momentous date arrives, says attorney Peter G. Goodman, a partner in the law firm of Kurzman Karelsen & Frank, your board should have a strategy for smoothly ushering your own computer system into the 21ST century - while also doing its best to minimize the possibility that Y2K problems will adversely affect building residents, management or the providers of goods and services you rely on.

In a co-op or condo, the Y2K bug could affect any number of important building systems that run on date-sensitive computers, says Mr. Goodman. For example, if your elevators are computer operated and the hardware or software is not programmed to be "Year 2000 Compliant," the elevators could stop working. Other systems that may be controlled by date-sensitive computer systems including HVAC, lighting and sprinklers, and security systems, such as fire and burglar alarms and any video surveillance apparatus.

The bug could also infect the vendors, suppliers and other service providers that work with your building, says Mr. Goodman. If your management firm keeps maintenance or common charge records on a computer system that is not Year 2000 Compliant, your building could lose valuable and irreplaceable information. The firm might also begin issuing bills that reflect arrears from the year 1900. Similarly, lenders might begin miscalculating interest rates, insurance companies could cancel policies, and energy suppliers could miss deliveries.

Furthermore, shareholders and unit owners may experience Y2K problems of their own. Individuals may be unable to pay maintenance timely if their own funds are diverted or delayed by Y2K anomalies. While the Social Security Commission has already made detailed provisions to ensure that benefit payments will continue uninterrupted in the new century, similar assurances are not yet forthcoming from Medicare or from a myriad of other government agencies, financial institutions, and other entities.

CHECK SYSTEMS & SERVICES FOR Y2K COMPLIANCE
Begin by developing an inventory of all data-sensitive equipment and systems found in the building. This can be done by a board-appointed committee, preferably led by someone who is familiar with computer systems. If any of your building systems or equipment are at risk, you will need to decide whether to replace or retrofit, taking into consideration the costs involved, as well as the deadline for having a compliant system in place by January 1, 2000.

APPROACH VENDORS & CONTRACTORS
The committee should also create a list of all maintenance, vendor and supplier contracts, and then determine which companies, if any, are Y2K compliant, recommends Mr. Goodman. Make sure the list includes the managing agent, as well as any banks, energy suppliers and contractors who maintain the equipment and systems within the building.

To gather this information, the committee will need to contact each of these companies and ask for an answer in writing, which the board should keep in a separate file. In the event any of the representations turn out to be false, these documents may form the basis for a claim for any damages sustained, advises Mr. Goodman.

If any of these companies are not Y2K compliant, it's in your building's interest to take action. The best option is to obtain representations and warranties from these companies that they will become Y2K Compliant by a date that you agree upon well prior to January 1, 2000. Your attorney can help you negotiate and prepare such representations and warranties. If a vendor or supplier refuses to provide a representation and warranty, consider replacing that company with one that is Y2K compliant.

Your shareholders and unit owners may also need help anticipating Y2K problems, some personal and some which may also affect your building. Because many residents may rely on paychecks, the social security administration, insurance reimbursements, etc., for the funds to pay their carrying costs, you may experience delays in receipt of payments for January 1, 2000. You can prepare for this in two ways, first by alerting building residents and suggesting that they consult their own banks, etc. on this issue. Secondly, by ensuring that the cooperative or condominium has ample reserves available-possibly even in cash-to function for a week or two if a crisis should occur. This would include meeting payroll and paying for necessary services.

INSURANCE CONCERNS
You should enlist your insurance broker and your managing agent to help you assess whether the building has adequate insurance coverage for any related loss. The general liability insurance policy should cover personal injury or property damage caused by any building system or equipment failure related to the Millennium Bug.

You should consider all possible types of claims. If major systems failures occur because of the Y2K Bug, shareholders and unit owners may withhold payment of their carrying charges. Business interruption coverage should provide indemnity for those losses. In addition, directors and officers insurance should provide both a defense and indemnity of individual directors and mangers for failing to make the cooperative or condominium Y2K compliant.